c Petitions shall be filed in duplicate, one copy for the clerk and one for service on the bankrupt.'

d If it be averred in the petition that the creditors of the bankrupt are less than twelve in number, and less than

preferential transfer (In re Israel, 12 B. R. 204; s. c. 3 Dill. 511; in re Schuyler, 2 B. R. 549; s. c. 3 Ben. 200; in re Currier, 13 B. R. 68; s. c. 2 Lowell, 436; Perry v. Langley, 1 B. R. 559; s. c. 7 A. L. Reg. 429; Everett v. Derby, 5 Law. Rep. 225; in re Romanow [D. C.], 92 Fed. Rep. 510; Simonson v. Sinsheimer [C. C. A.], 95 Fed. Rep. 948; in re Williams, 14 B. R. 132. As opposed to these cases, see Sinsheimer v. Simonson [D. C.], 96 Fed. Rep. 579; Simonson v. Sinsheimer et al. [C. C. A.], 100 Fed. Rep. 426). If the assignment were void because of the bankruptcy law, he is not affected thereby, and may file an involuntary petition (In re Curtis [D. C.], 1 N. B. News, 163; s. c. 91 Fed. Rep. 737) The same is true where a creditor participates in the benefits of an assignment before the passage of the bankruptcy act, that being too remote to be in contemplation of bankruptcy (In re Folb [D. C.], 1 N. B. News, 134; s. c. 91 Fed. Rep. 107). So a creditor who accepts a preferential transfer without fraud, it was held under the old law, was not estopped from filing an involuntary petition (In re Hunt & Hornell, 5 B. R. 433; in re Rado, 6 Ben. 230), nor one who acquires a lien through legal proceedings (In re Sheehan, 8 B. R. 345; Cox v. Hale, 10 Blatch. 56; s. c. 8 B. R. 562), the filing of the petition in such cases being deemed a waiver or surrender of the preference or lien (In re Sheehan, 8 B. R. 345; in re Broich, 15 B. R. 11; in re Bloss, 4 B. R. 147; in re Stansell, 6 B. R. 183. See in re Israel, 12 B. R. 204; s. c. 3 Dill. 511; in re Currier, 13 B. R. 68; Clinton v. Mayo, 12 B. R. 39; and also in re Frost, 11 B. R. 69; s. c. 6 Biss. 213, which is distinguished in the Broich case), though under the present law it has been held that he would be estopped until he surrendered the preference (In re Rogers' Milling Co. [D. C.], 102 Fed. Rep. 687), which he may do in the petition praying for the adjudication in bankruptcy, or in an amendment thereto made for that purpose (In re Rado, Fed. Cas. No. 11,522; s. c. 6 Ben. 230; in re Hunt, Fed. Cas. No. 6,882; in re Marcer, Fed. Cas. No. 9,060; in re Rogers' Milling Co., supra), a claim may be a provable one under 263 without being allowable under 8578. It is the provable-not the allowable-claims which are to be considered in determining the question as to whether a creditor holding a preference is entitled to file an involuntary petition. This seems to be settled by the cases above cited which hold that the filing of an involuntary petition by a preferred creditor is a waiver of his preference. The statute nowhere provides the time when or manner how the preference shall be surrendered in order to make the provable claim an allowable one. It therefore may be surrendered at any time to enable the creditor to receive the benefit of the act. It is true, until the trustee is appointed, no one is in a position to formally receive the surrender (In re Currier, 13 B. R. 68), but it may be informally surrendered by the act of filing the petition, and especially so if in that the creditor expressly surrenders it, making such surrender a part of his petition. The fact that a creditor attacks an alleged preference as fraudulent in a State court will not estop him from again questioning the validity thereof by proceedings in bankruptcy (Leidigh Carriage Co. v. Stengel [C. C. A.], 1 N. B. News, 387; s. c. 95 Fed. Rep 637).

Creditors who join in an involuntary petition and afterwards obtain a settlement of their claims cannot withdraw if such act will jeopardize the proceedings (In re Beddingfield [D. C.], 1 N. B. News, 385; s. c. 96 Fed. Rep. 190).

1The duplicates really constitute the petition, and both should be filed at the same time. If one is filed within the four months specified in 836, and the other is not filed until after the four months, the failure will be fatal (In re Stevenson

three creditors have joined as petitioners therein, and the answer avers the existence of a larger number of creditors, there shall be filed with the answer a list under oath of all the creditors,' with their addresses, and thereupon the court shall cause all such creditors to be notified of the pendency of such petition and shall delay the hearing upon such petition for a reasonable time, to the end that parties in interest shall have an opportunity to be heard; if upon such hearing it shall appear that a sufficient number have joined in such petition, or if prior to or during such hearing a sufficient number shall join therein, the case may be proceeded with, but otherwise it shall be dismissed.

e In computing the number of creditors of a bankrupt for the purpose of determining how many creditors must join in the petition, such creditors as were employed by him at the time of the filing of the petition or are related to him by consanguinity or affinity within the third degree, as determined by the common law, and have not joined in the petition, shall not be counted.

f Creditors other than original petitioners may at any time enter their appearance and join in the petition, or file an answer and be heard in opposition to the prayer of the petition.3

[D. C.], 1 N. B. News, 313; s. c. 94 Fed. Rep. 110). While the petition, under this section, is required to be in duplicate, the schedules must be in triplicate, for the use of the clerk, referee and trustee (27[8]).

1The petitioning creditors have a right to examine the debtor fully as to the persons listed by him as creditors (In re Hymes, 10 B. R. 433; s. c. 7. Ben. 427). An issue of fact may be raised in regard to the number of creditors and amount of claims upon which the court must pass, and its finding is conclusive and final, not subject to collateral attack, even though erroneous (In re Duncan, 8 Ben. 365; s. c. 14 B. R. 18; in re Scammon, 6 Biss. 130; s. c. 10 B. R. 66; in re Funkenstein, 3 Saw. 605; s. c. 3 Cent. L. J. 448; s. c. 14 B. R. 213; in re Burch, 10 B. R. 150; in re Rosenfields, 11 B. R. 88). The burden of proof on such an issue is upon the petitioners (In re Hymes, 10 B. R. 433; s. c. 7 Ben. 427; in re Frost, 11 B. R. 69; s. c. 6 Biss. 213).

2 As to the manner of determining the degree of relationship, see note 5, p. 74. This paragraph has reference to proceedings before adjudication in bankruptcy, all creditors, in effect, being parties after adjudication and entitled to be heard without any special order permitting them to intervene (In re Schwartz [D. C.], 1 N. B. News, 266). If a petition filed under paragraph b of this section,

g A voluntary or involuntary petition shall not be dismissed by the petitioner or petitioners or for want of prosecution or by consent of parties until after notice to the creditors.1

SEC. 60. Preferred Creditors.2-a A person shall be deemed to have given a preference if, being insolvent, he has procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any

sufficient upon its face as to the number of creditors and amount of claims, should prove defective in such respects for some good reason, such as the debts of one or more of the petitioning creditors not being provable, creditors otherwise competent may appear before adjudication, join in the petition and be reckoned in making up the number of creditors and amount of claims required to support the petition (In re Romanow [D. C.], 92 Fed. Rep. 510; in re Beddingfield [D. C], 1 N. B. News, 385; s. c. 96 Fed. Rep. 190). If the petition is not regular upon its face, however, it should be dismissed at once as the court has no authority to hold the case open in order that other creditors may intervene (In re Burch, 10 B. R. 150). The dismissal of the petition may be moved by the debtor or any creditor (In re Williams, 14 B. R. 132; in re Scrafford, 15 B. R. 104; S. c. 14 B. R. 184; in re Hatje, 6 Biss. 436; s. c. 12 B. R. 548).

1See 258 and notes regarding notice to creditors.

*For analogous provisions, see R. S. 225128, 5129, 5130; Act of 1800, 28; Act of 1841, 22; Act of 1867, 235.

See. 1(15) for definition of insolvency; 3 as to acts of bankruptcy; 864 as to priority debts; and 867 as to liens. The language of 3 should be construed in connection with that of this section so far as possible, both sections being parts of the same general subject (In re Tonkin, 4 B. R 52). If the language of both sections will not admit of the same interpretation, then each section should be construed independently (In re Nickodemus, 3 B. R. 230).

It is

The word "suffered" as here used does not embody the idea of procured. not necessary that the debtor should be fraudulently or in any way actively concerned in causing the judgment to be entered. The mere fact that the debtor is insolvent and an action shall be prosecuted to judgment against him is sufficient to constitute a preference without reference to the intent, if it has the effect of giving other creditors of the same class a greater percentage of their debts (In re Whalen [D. C.], 1 N. B. News, 228; in re Moyer [D. C.], 1 N. B News, 260; s. c 93 Fed. Rep. 188; in re Arnold [D. C.], 1 N. B. News, 334; s. c. 94 Fed. Rep. 1001).

I

Whether a transfer, lien or judgment amounts to a preference must be determined solely by the effect it has upon the rights of other creditors, the question of an intent to give a preference, or the character or manner of the transaction leading to it being immaterial (Goldman, Beckman & Co. v. Smith [D. C.], 1 N. B. News, 160; s. c. 93 Fed. Rep. 183; in re Whalen [D. C.], 1 N. B. News, 228; in re Moyer [D. C.], 1 N. B News, 260; s. c. 93 Fed. Rep. 188; in re Dwiggins Bros. [D. C.], 1 N. B. News, 292; in re Little River Lumber Co. [D. C.], 1 N. B. News, 306; s. c. 92 Fed. Rep. 585; Johnson v. Wald [C. C. A.], I N. B. News, 325; s. c. 93 Fed. Rep. 640; in re Arnold [D. C.], 1 N. B. News, 334; s. c. 94 Fed. Rep. 100; in re Christensen [D. C.], 101 Fed. Rep. 802; in re Sloan [D C.], 102 Fed. Rep. 116; in re Fixen et al. [C. C. A.], 102 Fed. Rep. 295). Under the former Acts, the intent to prefer was material. It was one of the essential ingredients of an act of bankruptcy and had to be proved (Morgan & Co. v. Mastick, 2 B.

of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.

R. 521; Miller v. Keys, 3 B. R. 224; Doon v. Compton, 2 B. R. 607; Perry v. Langley, 2 B. R. 596; s. c. 8 A. L. Reg. 427).

It should be noticed that the language of the statute contemplates that the preference shall be created only when the transfer is made to a creditor. If firm property be transferred by one partner to another, though injurious to the general creditors, the same cannot be impeached as a preference (In re Rudnick [D. C.], 102 Fed. Rep. 750). In this case, the partner who purchased the firm property transferred it to a bona fide purchaser for value, and the decision is based on the fact that all creditors suffered the same. And this is so even though the transfer be made under coercion (Clarion Bank v. Jones, 21 Wall. 325; Giddings v. Dodd, 1 Dill. 115; s. c. 4 B. R. 657; in re Blatcheider, 1 Low. 373). The intent is presumed when the transaction works the injury specified in the statute (Johnson v. Wald, supra), and the bankruptcy court may enjoin the disposal of property preferentially conveyed (In re Kimball [D. C.], 97 Fed. Rep. 29). An insolvent may in good faith borrow money to use in his business, give the loaner security therefor at the time the debt is incurred, and that security will not be voidable as a preference (867[d] and notes thereto; Tiffany v. Boatsman's Saving Inst., 18 Wall. 376; s. c. 9 B R. 245, Bruteston v. Cook, 6 E. & B. 296; Harris v. Rickett, 4 Hurl & N. 1; Lee v. Hart, 34 Eng. Law & Eq. 569; Hutten v. Crutwell, 1 El. & Bl. 15; Hunt v. Mortimer, 10 B. & C. 44; Belle v. Simpson, 2 H. & N. 410; Wadsworth v. Tyler, 2 B. R. 101; ex p. Shouse, Crabbe R. 482; Bentley v. Wells, 61 Ill. 59; in re McKay & Aldus, 1 Low. 561; s c. 7 B. R. 230; Gattman v. Hoena, 12 B. R 493), security being distinguished from a preferential transfer in that it is given at the time the indebtedness is incurred while the preferential transfer is made for an antecedent debt. Yet all transfers or payments made by an insolvent in consideration of such debts are not preferences. The effect must be to give one creditor a greater percentage of his claim than other creditors of the same class would receive. The real test seems to rest in the query as to whether the transfer on the whole diminishes the insolvent's distributable assets. If the transaction leaves him with as much assets which may be distributed among his creditors as he had before giving the security, then the security is not a preference and voidable, and if he has not as much, it is (Darby v. Boatman's Saving Inst., 1 Dill. 141; s. c. 4 B R. 601). The same principle is true when property is traded, or one form of security is exchanged for another (Chattanooga Nat. Bank v. Rome Iron Co. [C. C.], 102 Fed. Rep 755; Clark v. Iselin, 21 Wall. 360; s. c. 9 B. R. 19; s. c. 10 Blatch. 204; S. c. 11 B. R. 337; Livingston v. Bruce, 1 Blatch. 318; Sawyer v. Turpin, 91 U. S. 114; S. c. 5 B. R. 339; s. c. 1 Holmes, 251; s. c. 2 Low. 29; s. c. 13 B. R. 271; Burnhisel v. Firman, 11 B. R. 505; s. c. 22 Wall. 170; Cook v. Tullis, 9 B. R. 433; s. c. 18 Wall. 332; in re Hapgood, 2 Low. 200). This is also true when property is transferred in extinguishment of a valid lien (Catlin v. Hoffman, 9 B. R. 342; S. C. 2 Saw. 486; Hallack v. Tritch, 17 B. R. 293; in re Roseberry, 16 B. R. 340; s. c. 8 Biss. 112), though the property relieved by the payment or transfer should become subject to the payment of the debts of the general creditors. If it does not, as where money is paid on a mortgage debt, it is a voidable preference if it enables one creditor to realize a greater percentage of his claim than other creditors of the same class (Shutts v. F. N. Bank of Aurora [D. C.], 98 Fed. Rep. 705). Again, when a mortgage is given by an insolvent in good faith to secure future purchases of goods, the mortgage is valid to the extent of the value of the goods actually advanced in reliance upon such mortgage (Marvin v. Chambers, 12

b If a bankrupt shall have given a preference within

Blatch. 495; Schulze v. Bolting, 17 B. R. 167; s. c. 8 Biss. 174). It has also been held, under the old law, that an insolvent debtor in good faith may balance accounts or settle with a creditor in so far as that transaction does not result in any actual transfer of property to the prejudice of creditors (In re Comstock, 12 B. R. 110; s. c. 3 Saw. 517). The reason at the bottom of such a doctrine would suggest that the same might be done without regard to the motives of the parties, it being nothing more or less than the striking of a balance. But under each of the former Acts it was provided that transfers made with the intent to defeat the bankruptcy Act would be voidable as preferences. The good faith referred to in the case last cited undoubtedly has reference to such provisions and simply meant that such settlement should be made without an intent to defeat the bankruptcy Act. That reason cannot apply to the present Act since it does not contain such a provision. That it was the clear intention of Congress that such transfers should not be construed as voidable because of being preferential is evidenced by the fact that such a clause was embodied in the bill which became the present law, when it reached the conference committee, and was by that committee struck out. It may be said, therefore, that under the present Act, an insolvent may balance accounts with a creditor in so far as he does not transfer to him any actual property-property as distinguished from the debit account. It has, in fact, already been held under the present Act that he may settle his account in the usual course of business and transfer property in consummation thereof. The transfer of the property might constitute an act of bankruptcy, but the property so transferred would not constitute a voidable preference unless the creditor receiving it knew that a preference was intended (In re Eggert [D. C.], 98 Fed. Rep. 843), or had such knowledge of his debtor's financial condition as would put a prudent man upon inquiry, in which case he will be charged with a knowledge of the facts which such inquiry should reasonably be expected to disclose (In re Eggert [C. C. A.], 102 Fed. Rep. 735; in re Blair et al. [D. C.], 102 Fed. Rep. 987). This conclusion, though, will not reach beyond the accounts between the parties so as to cover transactions out of the ordinary course of their business, as where one liable with the insolvent pays the obligation after the insolvent has filed his petition in bankruptcy, he cannot deduct the amount so paid from an account, or balance of an account, which he owes the insolvent; he must pay that account to the insolvent's trustee, prove his claim for the payment he made in behalf of the insolvent and receive his dividend as other creditors (In re Bingham [D. C.], 1 N. B. News, 351; s. c. 94 Fed Rep 796; contra, in re Dillon [D. C.], 100 Fed. Rep. 627). An insolvent may assent to a creditor stopping goods in transitu before they have come into his possession: that will not amount to a preference, for the debtor is only assenting to a right which the creditor could otherwise lawfully exercise (In re Foot, 11 Blatch. 530; s. c. 11 B. R. 153). Where there is no mutual account, money paid in satisfaction of a debt is a preference within the meaning of this section if the bankrupt was insolvent at the time of such payment, "money" being "property" (In re Lange [D. C.], 97 Fed. Rep. 197; in re Conhaim [D. C.], 97 Fed. Rep. 923; in re Ft. Wayne Electric Corp. [C. C. A.], 99 Fed. Rep. 400; Strobel & Wilken Co. et al. v. Knost et al. [D. C.], 99 Fed. Rep. 409).

An agreement to pledge personal property as security for a debt is not executed until the goods are delivered to the creditor or set apart and treated as his. Under such agreement the creditor acquires no lien on the property, and if he takes it into his possession a few days before the filing of the petition in bankruptcy, the transaction will be a voidable preference, though the original agreement was made more than four months before that time (In re Sheridan et al. [D. C.], 98 Fed. Rep. 406). Such an agreement would be otherwise, however, did it